July 14, 2008

Dairy Trust Bid May Have to Go Higher

By GRAHAM, Kathy

A Waikato shareholder in Open Country Cheese (OCC) has said the price offered by dairy processor Dairy Trust for shares in the takeover bid for OCC would have to be considerably higher for him to sell.

Colin Young from Matamata said the takeover bid came as no surprise.

Earlier this week Dairy Trust announced its intention to make an offer to buy the 47.6 per cent stake in OCC that it did not already own.

"I have been expecting a full takeover from Dairy Trust since they increased their shareholding to 51 per cent," Mr Young said.

Dairy Trust bought a 52.4 per cent controlling share of OCC in July last year. The company, which includes shareholders Talleys and Affco, said it had secured a major food industry backer and was launching a full takeover bid for OCC.

Global product trader Olam International is reportedly buying 25 per cent of Dairy Trust for $101.05 million.

Mr Young said an independent report valuing the company last year put the shares' value in the three-dollar range.

"But the figure that I have received, which I think is unofficial at this stage, of $2.75, that figure certainly won't secure the shares they require. It would have to be considerably higher than that."

Mr Young said he would prefer to keep his shareholding in the company, "but that is commercial reality".

Proposed plans to build a 7 1/2 tonne-per-hour milk drying plant in Hamilton are still in the pipeline even if the takeover does not go ahead, said Dairy Trust chief executive Mark Fankhauser.

The land allocated for the new plant is next to the Affco processing works at Horotiu.

Mr Fankhauser said a similar sized plant built in collaboration with OCC at their Waharoa site is about eight weeks away from completion.

"We would not build a new drier until that one (at OCC) is full, but we expect that one to be full next season," he said.

Mr Fankhauser said construction of the plant could create upwards of 100 jobs. "On an on- going basis once it is up and running it would provide about 30 jobs."

Mr Fankhauser laughed at suggestions Dairy Trust was looking to take on dairy giant Fonterra.

"We have no desire to rival Fonterra," he said. "We are still very focused on remaining quite small and retaining that personal feel and touch."

Mr Fankhauser said the company also had plans for dairy plants to be built in Northland, Wanganui and Taranaki with construction of a milk powder plant at Awarua in Southland due to be finished next month.

Dairy Trust is bidding $2.75 in cash for the 47.6 per cent of shares in OCC. The price is a 31 per cent premium on the last market price of $2.10 a share.


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